When the bids were tabled, the triumphant buyers had offered $200,000 over asking.

“And it needs another $200,000 in renos,” adds Mr. Chaddah, who says his clients couldn’t have come close to competing in that contest.

The early spring market in Toronto has set a blistering pace.

“This is my sixth weekend without a day off,” says Mr. Chaddah, scrolling through his schedule. “And I’ll put in 20 hours this weekend.”

As another measure of the market’s temperature, Mr. Chaddah points to the sale this month of three houses by Toronto Community Housing.

“That was insane,” he says of the action around a semi on Crawford that backs onto the swimming pool at Christie Pits.

Potential buyers “were like flies to honey” when the three houses went up for sale on Crawford Street, he says.

Many house hunters thought they might snag a house for a juicy price, but the bidding was so intense that asking prices in the $400,000s were meaningless. That semi on Crawford went for about $750,000 while another a few doors north went for about $780,000.

Many industry watchers are questioning the sanity of buyers.

One who raised his eyebrows recently was the father of a young couple who outbid the pack to purchase a starter house near Bloor and Symington.

The property was listed for approximately $459,000, Mr. Chaddah recalls, and the couple prevailed with a firm offer of $540,000 or so.

They attached no conditions to their offer because Dad had promised to help with the money.

That all changed once the father found out how much the couple had bid, says Mr. Chaddah.

“He thought they overpaid so he wouldn’t advance the financing.”

In the end, the sellers released the young couple from the deal and sold to someone else but not without some consternation all around, Mr. Chaddah says.

“Can you imagine the family dinners after that?”

Mr. Chaddah blames the big banks for this current market frenzy.

When one lowered its rate on some mortgages to 2.99 per cent last month, rival banks lowered theirs.

Mr. Chaddah believes the bankers wanted to stir up some business during the winter doldrums – even as they are warning consumers to rein in their debt.

“They say everybody has to be more cautious – then they open up the gas tank and pour this massive amount of gas on the fire.”

He says buyers then feel pressure to lock in a deal while that mortgage rate is available and they end up increasing their bid for the house, which wipes out any savings from the lower interest rate. Mr. Chaddah would like to see things calm down a bit because many buyers from years past, he says, have not been paying down their mortgage. If interest rates rise, they will struggle.

Like many, he’s surprised that rates have remained low as long as they have. Now, he’s not so sure that Canada won’t be in for a long stretch of low rates.

For now, he’d like to see less intensity in the market.

The City of Toronto is still deciding how to handle the sale of hundreds of other TCH houses. Councillors were expected to discuss the plan today.

Mr. Chaddah’s advice?

If the City wants to sell them, there is no better time, given the current mood.

He figures he won’t have a weekend off until cottage season. But people are always gung-ho in the spring, he notes.

Like this:

A comparable property is one that is similar in size, condition, neighbourhood and amenities. One 1,200-square-foot, recently remodeled, one-story home with an attached garage should be listed at roughly the same price as a similar 1,200-square-foot home in the same neighbourhood. That said, you can also gain valuable information by looking at how the property you’re interested in compares in price to different properties. Is it considerably less expensive than larger or nicer properties? Is it more expensive than smaller or less attractive properties? Your real estate agent is the best source of accurate, up-to-date information on comparable properties (also known as “comps”).

Check out comparable properties that are currently on the market

In this case, you can actually visit other homes and get a true sense of how their size, condition and amenities compare to the property you’re considering buying. Then you can compare prices and see what seems fair. Reasonable sellers know that they must price their properties similarly to market comparables if they want to be competitive.

Look at comparables that were on the market recently but didn’t sell

If the house you’re considering buying is priced similarly to homes that were taken off the market because they didn’t sell, the property you’re considering may be overpriced. Also, if there are a lot of similar properties on the market, prices should be lower, especially if those properties are vacant. Check out the unsold inventory index for information about current supply and demand in the housing market. This index attempts to measure how long it will take for all the homes currently on the market to be sold given the rate at which homes are currently selling.

Consider market conditions and appreciation rates in the area

Have prices been going up recently or going down? In a seller’s market, properties will probably be somewhat overpriced, and in a buyer’s market, properties are apt to be underpriced. It all depends on where the market currently sits on the real estate boom-and-bust curve. Even in a seller’s market, properties may not be overpriced if the market is on the upswing and not near its peak. Conversely, properties can be overpriced even in a buyer’s market if prices have only recently begun to decline. Of course, it can be difficult to see the peaks and valleys until they’re history. Also consider the impact of mortgage interest rates and the job market on the economy. (Knowing your mortgage choices is important.

Are you buying a for-sale-by-owner property?

A for-sale-by-owner (FSBO) property should be discounted to reflect the fact that there is no 6 per cent (on average) seller’s agent commission, something that many sellers don’t take into consideration when setting their prices. Another potential problem with FSBOs is that the seller may not have had an agent’s guidance in setting a reasonable price in the first place, or may have been so unhappy with an agent’s suggestion as to decide to go it alone. In any of these situations, the property may be overpriced.

What Is the expected appreciation for the area?

The future prospects for your chosen neighbourhood can have an impact on price. If positive development is planned, such as a major mall being built, the extension of light rail to the neighbourhood, or a large new company moving to the area, the prospects of future home appreciation look good. Even small developments like plans to add more roads or build a new school can be a good sign. On the other hand, if grocery stores and gas stations are closing down, the home price should be lower to reflect that, and you should probably reconsider moving to the area. The development of new housing can go either way – it can mean that the area is hot and is likely to be in high demand in the future, increasing your home’s value, or it can result in a surplus of housing, which will lower the value of all the homes in the area.

What Is your real estate agent’s opinion?

Without even analyzing the data, your real estate agent is likely to have a good gut sense (thanks to experience) of whether the property is priced appropriately or not and what a fair offering price might be.

Does the price feel fair to you?

If you’re not happy with the property, the price will never seem fair, even if you get a bargain. Even if you pay a little over market value for a home you love, in the end, you won’t really care.

Test the waters

Even in a seller’s market, you can always offer below list price just to see how the seller reacts. Some sellers list properties for the lowest price they’re willing to take because they don’t want to negotiate, while others list their homes for higher than they expect to earn because they expect to negotiate downward or they want to see if someone will make an offer at the higher price. If the seller accepts your price or counteroffer, you’ll get an indication that the property probably wasn’t worth what it was listed for and you have a good chance at getting a fair deal. On the other hand, some sellers may underprice their properties in the hope of generating lots of interest and sparking a bidding war. Unlike on eBay, however, the seller doesn’t have to simply sell to the highest bidder: Sellers can reject any and all offers that don’t meet their expectations. If you have your heart set on the property, be warned that some sellers may be offended by lowball offers and refuse to work with you if you chose to employ such a tactic. Also, when you offer less than the list price, you may increase your risk of being outbid by another buyer.

Get an appraised value and a home inspection

Once you’re under contract, the lender will have an appraisal of the property done (usually at your expense) to protect its financial interests. The lender wants to make sure that if you stop making your mortgage payments, it’ll be able to get a reasonable amount of its money back when it forecloses on your home. If the appraisal comes in at considerably less than your offering price, you may not be getting a fair deal. In fact, the lender may not even let you purchase the home unless the seller is willing to bring the price down. A home inspection, which is completed after you’re under contract, will also give you a way to gauge your offering price. If the home needs many expensive repairs, you’ll want to ask the seller to make the repairs for you or discount the purchase price so you can make them yourself.

Conclusion

When you’re shopping for a home, it’s important to understand how homes are priced so you can make a sound investment and reach a fair agreement with the seller. Using these tips, you’ll be able to make a confident and well-informed offer on any home in any market.